CNN INSIDE POLITICS

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. JUDY WOODRUFF, CNN ANCHOR: I'm Judy Woodruff in Washington. WorldCom CEO in the hot seat. Is the public likely to buy his claims about the company's multibillion dollar accounting scandal?

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: I'm John King at the White House. President Bush hit the road again today to promote his domestic agenda. Are welfare reforms and marriage incentives a good match?

WOODRUFF: Also ahead, we'll ask one of the nation's top librarians why she wants to revoke President Bush's library card.

Thank you for joining us. You saw it here live on CNN just a short while ago. WorldCom CEO John Sidgmore facing the news media for the first time since the company revealed its nearly $4 billion accounting scandal.

(BEGIN VIDEO CLIP)

JOHN SIDGMORE, CEO, WORLDCOM: While the collective range currently is focused on WorldCom, I want to remind everybody that it was this company that audited our auditors. It was this company that turned itself in. It was this management team that took matters to the SEC. And it was this -- it is this management team that will take this company forward and restore public confidence.

RON BROWNSTEIN, "LOS ANGELES TIMES": Yes, absolutely. And the impact of this story, though, is profound in Washington. You know, the Enron scandal probably gave us the campaign finance law after the long delay. It was enough to push it over the line in the House.

This is probably going to be enough to push accounting reform, which only a month ago looked dormant, through the Senate next week, and to create some tough political choices for the Bush White House as they go forward. This backdrop is changing the agenda and is having an effect.

WOODRUFF: Are you saying that one company's problems are enough to change the political climate in this?

BROWNSTEIN: In this case, it's really the one more straw.

WOODRUFF: The accumulation.

BROWNSTEIN: The accumulation. There is a pattern, really, Judy, for this entire century. Government reform has often been driven by scandal. And whether the original formation of the SEC in the 1930s, the environmental laws in the late 1960s and early 1970s, it really takes something like this to break the inertia that often prevents action.

And, as you can see from President Bush, a rather sharp change in tone. When they came in, the administration and many of its key regulatory officials, not only in the securities area, but environmental occupational health, we're talking more about a cooperative, less confrontational tone with business.

Bush is now talking about throwing the book at corporate bad actors. He's going to give a speech next Tuesday in New York. It really is forcing a different response for them because the backdrop is changing. And some of the decisions look very different against this backdrop.

WOODRUFF: But right now, Ron, you've got two very different accounting reform pieces of legislation, one coming out of the House, one coming out of the Senate, that would be much tougher. So far the White House is with the House version.

BROWNSTEIN: The White House is still with the House. And some people have reported this week that the White House is supporting the Sarbanes bill, the Democratic bill, in the Senate. That's not right. They still prefer the House bill.

But what this has done is, both, make it more likely that something gets out of the Senate, and also increase the pressure on the White House to try to actually resolve the differences in conference. I mean, it might have been easier before to simply have this thing die.

Now there will be more pressure, I think, for there to be an actual accomplishment, an actual bill, that changes some of the rules. And that will require a great deal of intervention from the White House because, as you say, Judy, the House and Senate start, as on many issues, quite far apart.

WOODRUFF: Well, the Democratic nominee for president, Al Gore, dropped a bit of a bombshell over the weekend. He was meeting with supporters in Tennessee. He said the administration, in so many words, as he says, turned over all of these regulatory agencies to the industries that are being regulated.

BROWNSTEIN: Absolutely, and this is a line of criticism we'll probably hear a lot more of from Democrats. Because as you look across the government, not only Harvey Pitt, the chairman of the SEC, a former accounting industry lawyer, but in a number of areas -- in the environmental area, the interior department, agricultural department, occupational safety -- President Bush has reached out to a lot of people who come from the industries that now regulate. And many of them have been arguing that the government needs a less confrontational posture, more cooperation.

That has become not viable in the securities area. Harvey Pitt, who has language like that, is now talking about tough enforcement. There really hasn't been anything like Enron or WorldCom to drive a change in areas like the environment or occupational safety. But Democrats are going to try to make this a vulnerability. And Al Gore's comments are probably the leading edge of that.

WOODRUFF: And the White House is very conscious of that and they seem to be moving to try to get ahead of the story.

BROWNSTEIN: We'll see next Tuesday.

WOODRUFF: We'll see. All right, Ron Brownstein, thanks very much.

Now we turn to the war on terror and the disturbing question: did a U.S. attack kill dozens of civilians in Afghanistan? The Afghan foreign minister said today that about 40 civilians were killed by U.S. forces yesterday. But the Pentagon says it's too soon to say exactly what happened.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: I know that I've read in the paper that somebody said there was a wedding, and that there was celebratory firing into the air. All I know, or all Pete knows, is what we have heard from the other side -- that is to say, the U.S. forces. And my instinct is to let a day or two go by while the facts are being gathered.

(END VIDEO CLIP)

WOODRUFF: Let's bring in our senior Pentagon correspondent, Jamie McIntyre. Jamie, exactly what happened and how could it have happened?

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, they still don't know exactly what happened. But they've ruled out this errant bomb from a B-52. According to the testimony of a forward air controller on the ground, he believes that that bomb hit a hillside where there was nobody there, even though it missed its intended target.

So the focus is all on an AC-130 gunship that was responding supposedly to antiaircraft fire from six different locations on the ground. Now, is it possible that one of those six locations was in fact this celebratory fire from an engagement or wedding celebration that was going on? The Pentagon just doesn't know.

That's why they've sent an inspection team into the area north of Kandahar to try to interview witnesses, take a look on the ground. Try to see what the evidence shows. See if it's possible that that AC-130 crew mistook a gunfire and celebration for hostile fire from anti-aircraft guns.

If it turns out that that's the case, some Pentagon officials here quietly say that maybe the answer is for not to be conducting those kinds of celebrations with firearms, despite how traditional they may be for Pashtun weddings in Afghanistan. It's just not a healthy thing do in an area where the U.S. is operating.

And, by the way, we learn today that this operation was in fact going after what was thought to be possibly a high value Taliban target in an area where Mullah Omar, the fugitive Taliban leader, was last seen. Although Pentagon officials say that the intelligence at this point does not indicate that the high-value target was in fact Mullah Omar -- Judy.

WOODRUFF: All right, Jamie McIntyre talking to us from the Pentagon. Thank you, Jamie.

New questions also are being raised today about safety here at home. On Capitol Hill, employees are experiencing health problems ranging from headaches to skin rashes. But a new study says there is not sufficient information to link those symptoms with the irradiation of congressional mail that began six months ago in response to the anthrax attacks.

And even as many Americans take to the skies this holiday week, two America West pilots are out on bond after being arrested for allegedly being drunk in the cockpit. A Phoenix-bound jet was preparing for takeoff from Miami yesterday when officials called it back because security screeners had noticed a whiff of alcohol on the pilots.

We have an update now on the threat of a July 4th terror attack. Bush administration officials say that this week's FBI bulletin to law enforcement agencies will once again urge extra security precautions on the holiday. But, they say, the color-coded terror advisory is expected to remain at yellow, which signals an elevated threat level. Meantime, President Bush is urging Americans to have fun on the 4th.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: They should celebrate heartily because we have freedom, and we love freedom. And they should also know our government is doing everything it can to make the homeland secure. But people ought to be joyous in the celebration and celebrate the fact that we're fortunate enough to be Americans.

(END VIDEO CLIP) WOODRUFF: While Mr. Bush spends part of this holiday in West Virginia, security officials here in Washington will be out in force. Today federal and local police in the nation's capital urged the public to help them out by reporting anything suspicious.

(BEGIN VIDEO CLIP)

CHIEF TERESA CHAMBERS, D.C. PARK POLICE: Be our eyes and ears. When you come here, if you see something that looks out of place, let one of us know. With the help of the chiefs behind me and other chiefs in the metropolitan area, we will have 2,000 uniformed officers around this 300-acre perimeter.

(END VIDEO CLIP)

WOODRUFF: Law enforcement officials from more than 16 agencies will be involved in keeping Washington safe, trying to keep it safe, on the 4th.

Coming up next on INSIDE POLITICS, a watchdog sinks here teeth into the WorldCom scandal and the company's attempt at damage control.

Also ahead...

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Folks around the country felt that this election was stolen from him.

UNIDENTIFIED MALE: It was rigged. We got screwed.

(END VIDEO CLIP)

WOODRUFF: A new Spike Lee film on the 2000 election should give James Carville and Bob Novak plenty to argue about.

And later...

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: It gets so much attention because it's big and yellow and has a big beak.

(END VIDEO CLIP)

WOODRUFF: Why did the chicken cross the road? To make a political point, of course.

(COMMERCIAL BREAK)

WOODRUFF: I'm joined here in Washington by Nell Minow. She's co-founder of the Corporatelibrary.com. That's a shareholder watchdog group covering global corporations and corporate behavior.

Nell Minow, as we watch and see how much members of Congress are giving back to WorldCom, how outraged should we be by what happened in that company?

NELL MINOW, THE CORPORATE LIBRARY: We should certainly be outraged. The question is how outraged should we be about what's happening? Generally, how representative is this of corporate America?

It's very interesting that the day after the WorldCom announcement, Motorola came out with an adjustment that was almost as big, and yet nobody noticed and the stock price didn't budge. There's a big difference when the market recognizes between fraud and accounting correction.

WOODRUFF: How can consumers know, or investors know that the companies they have invested in, the companies they're dealing with, are being straight with them?

MINOW: Well, I can tell you one quick, easy thing that they can do to check, those shrinkwrapped packages that come every spring that most people throw away that are written on tissue paper, that's the proxy statement. And that's really worth looking at.

There's one section in the proxy statement called "Related and Certain Transactions," that shows whether the directors and the managers are doing business with the company. All of the companies that have gotten into trouble this year had long, complicated disclosures in that part of the proxy. And you could have been warned off just by checking that one place.

WOODRUFF: You were just telling me that you met today with the new head, relatively new head of the SEC, Harvey Pitt. What did you talk to him about?

MINOW: Well, I talked with him about the very issue that we're talking about right now, how representative are these problems of problems throughout the market, and how representative do investors believe they are, which is a whole separate question. I think the SEC is going to take a number of very important steps to make investors and citizens feel confident about our markets.

And remind them that this is a very small fraction of what goes out there. Nevertheless, even one disaster like this is too much. And I think we will see some very worthwhile reforms.

WOODRUFF: Were you talking to him regularly before all this broke in the last few weeks, or is this something...

MINOW: No, I think this is part of his outreach to his critics. And I was very, very impressed by what he's been doing and by his attitude. You know, public defenders often become the toughest judges. And I think his role in representing the accounting business is really helping him know what he needs to do now.

WOODRUFF: We were just talking to Ron Brownstein about different kinds of legislation moving through Congress, trying to deal with accounting reform. But one much tougher than the other. What do you believe needs to be done? You're familiar with both what is coming out of the House and what's moving through the Senate.

MINOW: I am, but that's really just a tiny piece of what needs to be done. I'd like to see some regulation of the accounting industry and I think that's going to come, whether or not either of the bills goes through, and the SEC is going to move ahead. But this is something that really takes a village to solve.

There's a lot that still needs to be done that's left to the states. And, of course, Delaware plays a crucial role here because most public corporations are incorporated in Delaware. And Delaware needs to do some changes. The New York Stock Exchange proposals, I think, are probably going to have a more profound effect than anything Congress can do.

WOODRUFF: Is either political party, Nell Minow, more culpable here in any way? Because, I mean, you have the Democrats saying the Republicans allowed an atmosphere of deregulation to lead to these kinds of abuses. You've had Republicans saying, no, no, the Democrats were in charge.

MINOW: If there was ever a case for total bipartisanship, both in accepting the responsibility and moving forward to make changes, this would definitely be it. It is everybody's fault, equally. And everybody has to work together on it.

WOODRUFF: And bottom line, bottom line, what needs to happen?

MINOW: All of the different parts have got to work better and that starts with the boards of directors. And remember, they are subject to state law, not federal law. So we really need to work on their responsibility. The auditors, the analysts, and the press has to do a better job too.

WOODRUFF: And -- but give me some specific examples. What were some ways that boards of directors fell down on the job, the press, the government?

MINOW: OK, the press, first of all, has tended to make CEOs into rock stars. And we have really glorified people like Jack Welch and Lee Iacocca.

WOODRUFF: We shouldn't have done that?

MINOW: No, we shouldn't have done that. Nobody is -- nobody deserves that much adulation. And certainly, nobody deserves that kind of pay. And I think that the excess in CEO pay has certainly been the symptom. And we are now getting a better idea of the disease.

Boards of directors have really let CEOs get completely out of control. And when you see the board of Enron waving the company's conflict of interest rules, you know that they've totally lost touch with what their job is as directors.

(CROSSTALK)

WOODRUFF: Accountants.

MINOW: Accountants have also been subject to no oversight. They successfully fought off oversight just a couple of years ago when Arthur Levitt tried to do some reforms then. I think it is time for them to recognize that they need regulation just like every other industry in this country. And they need to do a better job.

WOODRUFF: And maybe not doing consulting at the same time, which is, of course, something Congress is going to...

MINOW: It is something Congress -- I think that's really a red herring. I don't think it's that important. The fact is, if the company is paying the accountants, it doesn't really matter if they're paying them out of one pocket or two. I think as long as the board hires and fires the accountants, I think that's a better assurance of their independence.

WOODRUFF: And finally, government regulators. What do we need from the government?

MINOW: I think the most important thing we need from the government is better disclosure of these relationships between the accounting firms, between the members of the board of directors and the company. And better disclosure also on the shareholders' side.

We see a lot of shareholders who are voting contrary to the interests of the people who invest with them, in order to get more business. And we need to have a better understanding of how that works.

WOODRUFF: All right, Nell Minow, Corporatelibrary.com. She just told me she's been in big demand for interviews today and we know why. Thank you, Nell, for coming by. We appreciate it.

MINOW: Thank you.

WOODRUFF: An update on the final moments before that deadly plane collision over Germany next in the "Newscycle."

Also, another travel day for President Bush, another trip to the Midwest.

A look at the welfare debate and why marriage incentives are causing domestic disputes here in Washington.

(COMMERCIAL BREAK)

WOODRUFF: Among the stories in our "Newscycle," investigators in Germany are searching through the wreckage of a German cargo plane and a Russian charter filled with teenagers headed to Spain for a vacation. More than 70 people died in the midair collision. The cause is not known but the flight data and voice recorders in both planes have been recovered.

Adventurer Steve Fossett has succeeded in his quest to become the first solo balloonist to circle the globe. Fossett tried six times over 10 years to complete the trip. The record-breaking flight took 14 days. He plans to land tomorrow in Australia.

President Bush travelled to the Midwest for a second straight day to promote his version of welfare reform. CNN's John King has more on the president's plan and its incentives promoting marriage.

(BEGIN VIDEOTAPE)

KING (voice-over): Treat time for the Butler family, an after school tradition. And in the eyes of mom and dad, a welfare success story. The money for Jello pops comes from an extra $100 a month in welfare benefits West Virginia pays Darren and Terri Butler because they are married.

TERRI BUTLER, WELFARE RECIPIENT: Just the little things like, you know, having the kids be in sports. Trying to let them not live a life of poverty, even though we get welfare assistance. So it helps keep their lives normal, you know, so that -- because there's a lot of stigma to it with other kids now about those things.

KING: Marriage incentives like the West Virginia program are a White House priority as Congress works on new welfare legislation. This stop Tuesday at a Milwaukee church program, part of the president's lobbying campaign.

BUSH: The result we want is for everybody to feel a part of the American experience.

KING: But there are still some sticking points with Congress. A House-passed measure acceptable to the president requires welfare recipients to work 40 hours a week. Senate Democrats want to keep the work requirement at 30 hours.

Child care spending is another debate. The House approved $3.7 billion. The Senate version calls for $5.5 billion. A compromise on marriage incentives seems certain. Mr. Bush wanted to spend $300 million a year. Both the House and Senate called for $200 million. It's a tiny yet still controversial portion of the more than $16 billion in annual federal welfare spending.

KIM GANDY, NOW PRESIDENT: Marriage is not a substitute for true economic self sufficiency for these families. Marriage is great. I'm married myself. But I don't think that it's my position, and it's certainly not the government's position to say to poor women that marrying a man is your ticket out of poverty.

KING: Critics see a Bush payback to conservative religious groups. Supporters see common sense and say the president simply wants to build on state programs already in place.

TOMMY THOMPSON, HHS SECRETARY: What's wrong with being pro marriage and pro family? I mean, that's -- if someone wants to criticize that as being political, let them do it.

KING: Utah's program includes a video to couples considering marriage.

ANNOUNCER: Researchers have found a shared faith base can play an integral part in a successful marriage.

KING: Michigan encourages marriage in parenting classes.

UNIDENTIFIED FEMALE: What other people do you think babies should bond with? Dad.

UNIDENTIFIED FEMALE: Well, we'll put you both in job search.

KING: West Virginia explains its marriage incentives to couples applying for welfare. Terri and Darren Butler are both in school and hope to be off welfare soon, but value the extra $100 a month in the meantime.

DARREN BUTLER, WELFARE RECIPIENT: Like they say, money is the root of all evil. And when have you money problems you have marriage problems and everything. So the extra money does help.

KING: John King, CNN, the White House.

(END VIDEOTAPE)

WOODRUFF: With us now from the CNN "CROSSFIRE" set at George Washington University, James Carville and Bob Novak. James, all right, stricter work requirements with a little bit of an incentive thrown in there to get married. Is this the right way to go?

JAMES CARVILLE, "CROSSFIRE": Well, I think people should get married. I'm married, (UNINTELLIGIBLE) I'm very happily married. All of this stuff about welfare, the president knows it's sinking like a rock on account of this corporate accounting scandal. And that he's in trouble now because the story's mounting about his insider trading and shenanigans that (UNINTELLIGIBLE). I understand there's going to be some talk on the Hill.

So this is all nothing but a head fake to try to divert attention from the real problem going on in America, and that is the plummeting stock market. People are losing money in their 401(k)s.

Yes, I think people ought to be married and I think people ought to be prosperous. If he worried more about people being prosperous, you'd have more happily married people out there.

WOODRUFF: Bob, I don't know which question to ask you.

ROBERT NOVAK, "CROSSFIRE": Let me just respond. That's absolute nonsense. James can take any subject and turn it into a Bush bashing exercise. As a matter of fact, the welfare reform with President Clinton signed regrettably, in fear of -- in 1996, has turned out to be a terrific success. There's not people in the streets starving as a lot of the enemies claim.

It has to be renewed, James. It's not a head fake. It's a matter of law, if you'd look that up. And everybody agrees that it's a good program.

WOODRUFF: What about increasing the work requirement from 30 to 40 hours?

NOVAK: It should be 40 hours. People should work. And people should be married. Everybody knows that the children of married couples have a much greater chance of success than people in a single parent home.

WOODRUFF: But is the amount of money going into the marriage incentive, as John pointed out, $200 or $300 million out of some 16 billion being spent on welfare reform.

NOVAK: Well, you also heard that guy that says, gee, $100 a month is OK.

CARVILLE: You know what, let's spend 100 million and let's go out. Just don't divert attention from what's really going on. And that's that President Bush got caught on insider trading and accounting scandals. And this is just a great diversion. It's just diversion.

A hundred million dollars, you can just give them the hundred million dollars and get Harvey Pitt out of there. Let's make a gravy train. Let's put 500 million in marriage assistance and get Harvey Pitt out of the SEC so we can focus on what's really wrong in America.

NOVAK: This isn't the Democratic war room, where you turn every single debate and every subject into a Bush bashing.

CARVILLE: I'm for the 500 million. I'm for all that.

WOODRUFF: Speaking of the war room, gentlemen, Spike Lee has put together a documentary about the 2000 election. It ran last night on the Showtime channel. I want to show you an excerpt of it and get your reaction. This is just part of it.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Throughout the course of the day the exit poll numbers showed it very even. Either we were up a point, or dead even.

UNIDENTIFIED FEMALE: Early that morning I was on the radio, WTMP, Stacey Powers' show. And people started calling in, saying, you know, we're standing in lines, the place is not open.

UNIDENTIFIED MALE: We had started getting calls from people who were complaining they had had a hard time voting, that the ballot was confusing.

UNIDENTIFIED FEMALE: George Bush was No. 2. Pat Buchanan No. 3, Al Gore No. 4. But the way it liked on the paper, you saw George Bush and you said, under no circumstances. And then you saw Al Gore and you say yes. But actually that was No. 3 on the butterfly ballot.

UNIDENTIFIED MALE: There was a woman who spoke at town hall meeting many weeks later who was a Holocaust survivor, who summed it up pretty well. She was scared to death that she had voted for an anti-Semite.

UNIDENTIFIED FEMALE: For the first time Jim Crow came back on the scene.

UNIDENTIFIED MALE: There were thousands of Floridian voters, mostly -- no shock to you, I'm sure -- African-American, who Katherine Harris' firm had -- that she had hired, had purged from the voting rolls.

UNIDENTIFIED MALE: Where over 8,000 people were classified as felons.

UNIDENTIFIED MALE: As it turns out, they weren't felons. She's actually admitted that this little mistake was made. By the way, the firm was from Texas.

UNIDENTIFIED FEMALE: Well, Jeb "Crow" Bush and Katherine "Crow" Harris designed ballots that people couldn't understand, long voting lines, malfunctioning voting machines. All types of games went on on Tuesday, November 7.

(END VIDEO CLIP)

WOODRUFF: Bob Novak, Al Gore was robbed?

NOVAK: That wasn't a documentary. That was propaganda. Shame on Showtime for showing it. Shame on CNN for showing a big block. That's all old stuff. We've been through that. The country's passed on from it. And Donna Brazile, bless her little heart, will always play the race card. And you shouldn't play the race card in this country.

CARVILLE: I don't think Spike Lee is going to get an Academy Award, but he is stating something that everybody knows. Al Gore won the election. Thief Justice Rehnquist and the Supreme Court stole it. They did everything they can to keep people from voting. They had confusing ballots. They what they could to keep African-Americans from voting.

But people know that. We don't need to rehash the old things. We'll deal with that in 2004. This White House is not there as a result of a popular vote, a popular mandate. Therefore, they shouldn't be allowed to appoint any ideological judges. And that is going to happen until we get a validation election, which we will have in 2004.

WOODRUFF: Well, it is harmful to show this kind of material?

NOVAK: Yes, it is. It is, because it is one-sided. It is nonjournalism. It's the kind of thing that everybody in television should avoid, just having these ideologues and partisans giving this claptrap out there. And that's what people hate to see. They don't like to see the one-sided presentation like that, So, I think it is harmful. Yes, I do.

CARVILLE: Anytime the truth is unpleasant, as big as the truth -- and the truth, in the long run, is never harmful. Sometimes the truth is unpleasant. And that's what this is. And I don't understand why anyone has any objection to Spike Lee airing what everyone knows is the truth.

NOVAK: Spike Lee is a left-wing ideologue. And worse than that, he's a Knicks fan.

(LAUGHTER)

CARVILLE: Slammed on Spike Lee.

WOODRUFF: All right, is that the worst thing you can say about him, Bob? All right, we're going to...

NOVAK: I can say a lot more if you give me some more time.

(LAUGHTER)

WOODRUFF: We're going to leave it there, Bob Novak, James Carville.

You get can much more from these gentleman tonight at 7:00 on "CROSSFIRE."

Thank you both.

And we want you to give us your opinions on these topics and more at CNN.com/INSIDEPOLITICS. Plus, don't forget to e-mail Bill Schneider with your ideas for this week's "Political Play of the Week." That's every Friday.

Move over soccer moms. Up next: There's a new drive to win the votes of racing fans. Our Bill Schneider will tell us which party is fastening its seat belts.

(COMMERCIAL BREAK)

WOODRUFF: None other than Britney Spears may have put her finger on the pulse of politics. She has signed on to star in a new movie billed as the first official NASCAR film.

Well, our Bill Schneider is in Los Angeles to explain why NASCAR is in in political circles -- hi, Bill.

SCHNEIDER: Judy, let's play fill in the blanks. The blanks are swing voters. The blanks' votes are up for grabs this year. Whoever wins the blanks wins the election. Sound familiar?

(BEGIN VIDEOTAPE)

(voice-over): Back in 1994, angry white men ruled the electorate. They met their match in 1996, when Democrats discovered soccer moms. In 1998, we got waitress moms, too busy to chauffeur their kids around to soccer games. "You folks be wanting anything else?" politicians asked. Yes. Wired workers were all the rage in 2000. Three cheers for the new economy! Hip, hip, kerplop. Now Democrats have discovered a neglected constituency that's been slipping away from them: men. Well, what kind of men? Upscale office park dads? Or the newest target group to zoom onto the field: NASCAR dads.

CELINDA LAKE, DEMOCRATIC POLLSTER: Well, they tend to be married to the waitress moms. And while the waitress moms are watching "Oprah," the NASCAR dads are watching the car races on television.

SCHNEIDER: But are NASCAR dads swingers? Sure. Their values are Republican. Their economics are Democratic. Why does every election cycle seem to bring a new key group? Because the voters are split 50/50. Remember the Florida recount? Now NASCAR dads are running over all those wired workers who got short-circuited by the dot-com bust.

LAKE: Governor wise of West Virginia, who beat a Republican incumbent, promised, as part of his economic development package, to bring the first NASCAR racetrack to West Virginia.

SCHNEIDER: When elections are close, every voter determines the outcome. And every group can be called a swing group.

(END VIDEOTAPE)

SCHNEIDER: Well, almost every group. You would never call Christian conservatives a swing group. They are solidly Republican. And they're certainly not swingers -- Judy.

WOODRUFF: Well, you would have to ask them that, right, Bill?

SCHNEIDER: Well, I don't think I have to.

(LAUGHTER)

WOODRUFF: OK.

Bill Schneider, in Los Angeles, we'll see you tomorrow.

SCHNEIDER: OK.

WOODRUFF: There is word today that a longtime House Republican plans to retire from Congress. Republican sources tell CNN Representative Benjamin Gilman of New York will announce his retirement later this evening. Gilman, who was first elected in 1972, has decided against a run against fellow Republican Sue Kelly in a newly redrawn district. Gilman has considered switching parties and running against Kelly as a Democrat, but sources are now saying that scenario is not likely.

Checking the headlines in our "Campaign News Daily": Massachusetts Republican Mitt Romney hit the road with sanitation workers today in his latest workday event. The multimillionaire candidate for governor spent about two hours emptying bins with a recycling crew, making good, he said, on his promise to -- quote -- "clean up the mess on Beacon Hill."

Democrat Ron Kirk is leading Republican John Cornyn in the race for the open Senate seat in President Bush's home state of Texas. A University of Houston poll of likely voters gives Kirk an eight-point lead over Cornyn; 34 percent say they are undecided.

In Florida, the president's brother still holds commanding leads over his two potential Democratic opponents for governor. Republican Jeb Bush leads Janet Reno 53 percent to 37 percent. But that is a six-point swing to Reno's favor since a poll that was taken five months ago. Bush leads Reno's primary opponent, Bill McBride, 49 percent to 31 percent. In the primary matchup between Reno and McBride, 45 percent of Democrats polled support Reno; 18 percent say they support McBride; 33 percent, meanwhile, say they are still undecided 2 1/2 months before the primary.

The secretary of state discusses the Middle East and the war on terror. Colin Powell talks with our Andrea Koppel when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: Just a short time ago, our State Department correspondent, Andrea Koppel, sat down with Secretary of State Colin Powell. They covered several key topics relating to the war on terrorism. But they began by discussing U.S. policy in the Middle East.

(BEGIN VIDEOTAPE)

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: Is it realistic to expect the Palestinians to undertake these reforms that you've alluded to there while the Israelis are still occupying their territories, and knowing that, even if they do all of this, in three years, they are only going to get a provisional state? They still have to negotiate borders and all of the other final-status issues.

COLIN POWELL, SECRETARY OF STATE: Well, it will be difficult for them to undertake transformation unless we can get some relief in the degree of containment that exists there right now. What the Israelis...

KOPPEL: So, the Israelis should begin to withdraw?

POWELL: You can let me finish the answer.

The Israelis right now believe that the activities they are undertaking are necessary for their self-defense. We hope that they will soon come to the conclusion that things are starting to improve and they can release their hold in some of these places. They don't want to be sitting there in this occupation mode. And we have been in conversation with them.

And if we're going to get transformation, the Palestinians have to be able to move back and forth. They have to be able to assemble. They have to be able to bring new leaders in who can actually work. And so we are in discussions with the Israelis about that, as well as with the Palestinians about that at different levels.

And we hope that, in the months ahead, the Palestinian people will have a chance to see their leadership transform itself, bring in new institutions, new leaders. And, hopefully, they will reach the judgment that perhaps they do need new leaders. I mean, there was a major demonstration in Gaza yesterday, where thousands of Palestinians protested against their own current leadership.

And so there are these fissures within the Palestinian leadership that suggest maybe people are starting to realize: "Where are we getting with the current leadership that we have? And perhaps we should consider new leaders."

KOPPEL: Even some of those who support the president's new Mideast policy have said that the administration is setting the bar so high that, in effect, what you're doing with your policy and the situation is putting it on the back burner. Are you saying that American domestic politics played no role in this decision?

POWELL: I would -- why would I have -- I didn't say that and I'm not saying it now. It has nothing to do with domestic American politics. It has to do with the fact that we have a very difficult situation.

The bar is not that high. The bar begins with and it's at a level that says: "Stop the terrorism. Stop supporting terrorism. Stop condoning terrorism. Stop perhaps even financing organizations that are participating in terrorist activities."

That is not an unreasonably high bar. You leap over that bar and you'll find that the next one is not that hard to get over either. And that is the beginning of discussions with the Madrid quartet, with those individuals that Ambassador Burns, my assistant secretary for this part of the world, is organizing in London today that will help the Palestinian people and the Palestinian leaders begin to put in place a more effective security structure to keep the violence under control.

So, there's a way forward. And I don't think the bar is too high. It is high.

(CROSSTALK)

KOPPEL: We're talking about more meetings, more meetings, the same way that, before the president delivered his speech, you had consultations with the quartet. And it just seems as if that's going to go on for many, many months without results on the ground.

POWELL: Well, you don't get results unless you do have meetings and you get people to begin working together and to cooperate with one another. I wish that you could snap a finger and end all terrorism, but it is going to take the Palestinian leaders and the Palestinian people to make a judgment that this kind of terrorist activity and this kind of violence will never lead us to that which we want, which is a Palestinian state. And what President Bush said is: "I want for you a Palestinian state, living side by side in peace with Israel. I will help you get there. Let's see if we can do it in three years."

But the first thing we have to do is to get the terrorism under control, because you cannot have dialogue between two people, trying to acquire peace between the two of them, in this atmosphere of bombs going off. And every time we got close, every time these meetings really did start to produce a positive result, bombs would go off and set us back. That has to end.

KOPPEL: Speaking of terrorism, today the State Department -- or, actually, last night -- put out another worldwide caution to Americans, expecting, possibly, an attack against American interests.

Do you foresee a day, Mr. Secretary, when the American people, not only those living overseas, but here in this country, will be to go down to the Washington Mall, Manhattan, and not worry about a terrorist attack?

POWELL: Well, I think it is going to be some time before we can reach that level of comfort again in our society. But that doesn't mean we can't enjoy our society.

People will be on the Mall here on July Fourth. I'm going to be in Philadelphia celebrating. I'm going to be entertaining here on July Fourth. My family is going to be out and about. We're going to be vigilant. We're going to be alert. At all of our embassies around the world, we're going to be on the alert. We're going to protect ourselves. We're also going to enjoy ourselves and celebrate our holiday, because we're Americans.

We don't walk around afraid of our own shadow. We have the courage of our convictions and the courage of our value system. And we believe in this nation. And we're going to celebrate the Fourth. But we'll be vigilant. And for those who wish us ill and those who are creating this level of concern, slowly but surely they will be defeated over time. President Bush told the American people this will be a long, slow campaign, and we must have patience.

(END VIDEOTAPE)

WOODRUFF: Secretary of State Powell talking with our Andrea Koppel at the State Department just a short time ago.

We'll find out who is throwing the book at the president next on INSIDE POLITICS. Mr. Bush has managed to rile up the nation's librarians. And the fact that he's married to one of their former colleagues apparently is not helping.

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WOODRUFF: A new poll shows first lady Laura Bush is more popular than ever, with her approval rating up to a hefty 69 percent. Mrs. Bush may want to use her influence with her former colleagues, the nation's librarians. Now, they are angered by Bush administration policy allowing FBI investigators to inspect the library reading records of potential terror suspects. Mrs. Bush is siding with her husband, saying -- quote -- "These are extraordinary times for our nation because we are at war against terrorism."

But would America's librarians would like to suspend the president's borrowing privileges anyway? Let's ask Judith Krug of the American Library Association.

Ms. Krug, first of all, are there FBI agents out there actively looking at people's reading records around the country?

JUDITH KRUG, AMERICAN LIBRARY ASSOCIATION: Well, the only evidence that we have is a study that was recently done by the University of Illinois Library Research Center, where they queried 1,020 libraries. And, apparently, 85 of them have been visited by FBI agents since the passage of the USA Patriot Act.

But that is basically the only information that we have. And that is all the information that we have. We don't know who was visited, what was requested, or so on.

WOODRUFF: Well, why are you so troubled by this notion that, at a time when we're at war against terrorism, FBI agents are looking at this kind of material?

KRUG: Well, we agree that we are at war. We agree. And these are difficult times.

But, at the same time, this is the United States of America. And we have to balance the fact that we are at war with the fact that libraries are the most important institution that a free people can claim. It is there that the public can find out the information that they need, not only about what's going on in the world today, but also what's important for us in order to conduct our lives appropriately.

And so, this major public institution must remain sacrosanct, in our opinion, so that people can go in, read the information that they need and that they want, and make the appropriate decisions. It is indeed...

WOODRUFF: Well, let me...

(CROSSTALK)

KRUG: I'm sorry.

It's a balancing act.

WOODRUFF: Let me just read to you again what Mrs. Bush said, who, as we know, had a career as a librarian up until the time she became the wife of the governor and so forth. She said: "These are extraordinary times for our nation because we are at war against terrorism."

Are you surprised by her position?

KRUG: Oh, absolutely not.

We agree that these are extraordinary times. And, as I said, we are willing to do whatever we can do. But this is a nation of law. And there are laws in every state of the Union and the District of Columbia which guarantees the privacy and the confidentiality of library circulation records.

However, there are mechanisms in all of these laws in order to allow appropriate authorities to reach into these laws. But they have to follow the standard that is written into the law. And that means that they have to get an appropriate court order, that has to be in proper form, that does show good cause. And then we will act on it.

(CROSSTALK)

WOODRUFF: And you know for a fact that that has not been done?

KRUG: I honestly don't know, Judy, because the only evidence that we have is the fact that 85 libraries out of the 1,020 that were queried said that they had been visited. That's all the information that we have.

We assume that these libraries were visited under the new FISA requirements that are included in the USA Patriot Act. And attached to those requirements is a gag order, so that, basically, librarians can't tell us what has been wanted and the subject of the search or anything else.

WOODRUFF: Have you tried to get the administration to change its policy on this? Obviously, this is an act of Congress that's been passed. Have you tried to get in touch with the first lady?

KRUG: I have not personally. I suspect that some of my colleagues have tried to do that, but I can't speak from personal experience.

WOODRUFF: But I assume you're actively trying to get this overturned? Is that safe to assume?

KRUG: I assume that parts of the ALA and other parts of the profession are working toward that end. We are very proud to have a librarian in the White House. And she has done wonderful things since she's been there on behalf of libraries and reading.

WOODRUFF: All right, Judith Craig -- Krug, Krug, of the American Library Association...

(LAUGHTER)

KRUG: Thank you.

WOODRUFF: ... thank you very much for joining us.

KRUG: You're more than welcome. WOODRUFF: We appreciate it. Thank you so much.

I'll be back in a moment with a taste of chicken and politics, but now let's take a look at what's coming up on "WOLF BLITZER REPORTS" -- hello, Wolf.

WOLF BLITZER, "WOLF BLITZER REPORTS": Hi, Judy.

Dozens of Marines at Camp Lejeune, North Carolina, have been busted for using designer drugs. We'll have a live report from the Pentagon. Also, travel warnings and security alerts for Americans leading up to the Fourth of July: We will tell you what you should be looking out for. And when flying, should you be worried about the condition of your pilot? A former FAA official joins us on the story of two pilots charged with being drunk in the cockpit.

All that coming up at the top of the hour, right after INSIDE POLITICS.

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WOODRUFF: A quick look ahead to what's in the works for tomorrow's INSIDE POLITICS: Our guests will include Teresa Chambers. She's the new head of the United States Park Police. She'll give us a rundown of how her force plans to handle the Washington crowds and security concerns this Fourth of July.

Well, finally, if you think politics sometimes resembles a game of chicken, perhaps you have been following the Massachusetts governor's race and that challenge to Mitt Romney's residency that recently was thrown out by a state commission.

MCMANUS: Spilman's poultry politics are not anything new. It seems, wherever politicians gather, chickens follow. Here is one being corralled at a 1992 presidential rally. Here's another outside a Medicare hearing on Capitol Hill.

SPILMAN: And I thought now would be a good opportunity to bring the chicken to Boston.

O'BRIEN: We'd rather get past sort of this chicken politics and get into the real issues.

SPILMAN: I'm in a chicken suit. I think it's funny. I'm getting a good laugh.

(END VIDEOTAPE)

WOODRUFF: And so are we. Thank you, Michael McManus. I think you've started a trend.